Long-term bitcoin watchers have seen this happen before, and they
know that bitcoin rallies can be huge.

The last time bitcoin's value began soaring the cryptocurrency
went from below $200 in September 2013 to more than $1100 by
early 2014.

Right now – after the recent gains – bitcoin is trading at
around $380. That's right, after that peak last year,
bitcoin crashed – badly damaging investor
interest. It took more than a year for that interest to return.

So what's bringing people back? The digital currency is
gaining traction both in the consumer marketplace, as a tradeable
security, and with regulators. To illustrate - you can donate to
the American Red
Cross in bitcoin, buy a new personal computer with it,
or even book a holiday.

It isn't just digital-currency enthusiasts that are bullish.
Equity research firm Wedbush expects it to rise to $600 because
of the growing adoption. That target includes a "high
discount rate to account for uncertainty," the firm says in a
Nov. 4 research note. In other words, there is a lot of risk
here, but even factoring that in, the potential exists for a big
gain.

“We’re crossing the chasm from early enthusiasts
to mainstream adoption," says Adam White, a vice president of
business development with bitcoin
exchange Coinbase.

Payments
with bitcoin have been on the rise — as has the value of bitcoin,
as an investment.Wedbush
Securities

As more people use bitcoin, retailers have
become increasingly welcoming of it.

Companies including Dish, Microsoft, Dell and Expedia are
accepting cryptocurrency as payment.

Perhaps most crucial: payments startups and legacy players
including Square, Stripe, and PayPal are integrating it into
their offerings.

Regulation is evolving

Regulators in the US and internationally are embracing bitcoin
now, instead of fearing — or, worse still, thwarting — it.

"What there needs to be is greater regulatory clarity," said
Jerry Brito, executive director at Washington-based advocacy
group Coin Center. "It's a very different world than it was
in 2013."

Bitcoin legislation is being readied in several US states,
Brito said.

In October, a consortium of startups
announced the establishment of the Blockchain Alliance, a
partnership between bitcoin companies and US and foreign agencies
including the Department of Justice, FBI and the Commodity
Futures Trading Commission, among others.

"The global banks and wire-houses have
meaningfully gotten involved in the space," said Michael
Sonnenshein, director of business development and sales at
Grayscale Investments, which manages the Bitcoin
Investment Trust, a publicly listed vehicle that tracks
bitcoin. "In 2013, they were beginning to dip their toe,
but primarily behind closed doors and within internal working
groups."

There are still lingering issues surrounding bitcoin's validity.

To be sure, it is volatile and – because its
loosely regulated – a draw for frauds and criminals.

Some big names in the crytptocurrency community — perhaps
most notably Blythe Masters, the CEO of Digital Asset Holdings —
have been critical of bitcoin and say the underpinning blockchain
technology is actually what's most sexy to Wall Street.

But right now, to many investors, bitcoin is hot. And it could
stay that way.